Islamic Finance and Securitization: Man-Made Tale or Reality

Abstract:     
The core and fundamental axiom of Islamic finance is the elimination of riba which literally means interest. Islam's unconditional prohibition of riba changes the landscape of the Islamic financial system. Prohibition of interest by Islam is actually an indirect prohibition of pure debt security. Instead of debt other forms of financing based on the principle of sharing of profit and loss are recommended under Shariah (Islamic law). We will look at most of the shariah compliant services and whether that is not just a leap of faith. However Plato's Theaetetus of belief, knowledge and understanding will try to bring out some light on that issue.

Number of Pages in PDF File: 23

Keywords: islamic, finance, securitization, riba, mudarabah

JEL Classification: A13

working papers series